Household Income, Asset Allocation, and the Retirement Decision

We examine the financial condition of households as they move into retirement and the relative influence of wealth and income on the deision to retire. We find no significant difference between the net worth of retired and nonretired households, suggesting that retirees are no more adequitely prepared than the nonretired subsample. With respect to portfolio allocation, retired households have significantly more financial assets, with a concentration in fixed-income secuirities, but home equity accounts for nearly half of their net worth. In addition, other household members employment earnings generate approximitely 40% of income for retired households.